Scale really is so important in the current economic climate. You just have to have enough bulk – and have it well spread – to be better able to withstand the buffeting of stormy seas. Even the extra ballast that Paris-based IT services (and increasingly, software) firm Sopra took on in the UK last year with a couple of acquisitions (see Sopra UK goes shopping (again) to double size) was not enough to hold the ship steady in UK waters.
Sopra UK’s revenues fell by 3% (organic) to €47.5m (c. £40m), but by my estimates, the underlying decline was more like 16% (local currency) if you exclude the effect of the acquisitions. Sopra’s much larger peers (Capgemini, Atos and Steria) showed at least some growth in their UK businesses (see here and follow the links). However, the acquisitions transformed UK profitability, which hit 8.2% (H1 2011: 1.3%).
At group level Sopra also underperformed peers. The 11% growth in headline revenues to €590m belied just 1% organic growth. Sopra’s operating margin on continuing businesses lost a little ground, down 30 bps to 7.7%, though a better showing than peers. This could become an improving story as Sopra consolidates its financial services packaged software activities and puts more wind behind its sails.
But the question is, how does Sopra plan to plug the leaks in the UK boat?